Schroder Real Estate announces that it has acquired the freehold interest in St. John’s Retail Park in Bedford for £31.8 mln (€43.7 mln) reflecting a net initial yield of approximately 6.5%. The property is well located approximately 1.5 miles to the south of Bedford town center and comprises a 130,000 ft² (12.077 m²) retail warehouse park let to 12 tenants with an adjoining 11,600 ft² (1.077 m²) office building.
The retail park produces a rent of £2 mln (€2.7 mln) per annum. The average unexpired lease term, assuming all tenants break at the earliest opportunity, is 7.9 years with tenants including DSG Retail Limited (24% of income expiring in September 2020) and Homebase Limited (17% of income expiring in May 2024). There is a single vacant unit comprising 5,000 ft² (464 m² ) where terms have been agreed for a new letting. Approximately half of the office building is let to DHL GBS (UK) Limited.
The acquisition satisfies the Company’s investment criteria by offering:
-An above average initial yield of approximately 6.5% with potential for immediate growth assuming the completion of lettings under offer to new tenants;
-Good fundamentals due to tenant demand, affordable rents, low retail warehouse supply and vacancy in Bedford and above average population growth for Bedford and the surrounding area; and
-Significant scope for asset management including lease extensions and widening the planning consent in order to increase the rental tone and improve the tenant mix.
Commenting, Duncan Owen, Global Head of Real Estate at Schroders said: “The acquisition follows the disposal of low or non-income producing property and results in SREIT being substantially invested with a fully covered dividend. Converting to UK-REIT status has enabled SREIT to be more agile and competitive by extinguishing the capital gains in the vendor special purpose vehicle and therefore enhancing SREIT’s initial income return.”
Source: Schroder Real Estate